Car Loan + Credit Card + Small Store Card: Which to Pay First?

Meet James. He's 35, works in IT, has a reliable car (that he's still paying off), and two credit cards he wishes he'd never opened. His total debt: £15,980.

Here's his mix:

Car Loan:

Credit Card:

Store Card:

Total monthly payments: £480

Total monthly interest: £132

James can scrape together an extra £75/month by cutting back on dining out and pausing his gym membership. But where should it go?

The Temptation: Attack the Car Loan

James's first instinct was to throw the extra £75 at the car loan. "It's my biggest debt," he said. "Once it's gone, I'll have so much breathing room. That £350/month payment will be free to throw at the credit cards."

Here's the problem: The car loan has the lowest interest rate. At 6.5% APR, it's not bleeding him dry the way the credit cards are at 19.99% and 22.99%.

If James puts his extra money toward the car loan, he's letting the high-interest credit cards keep charging him massive interest every month. That's expensive.

Running the Numbers

We ran James's debts through our [Debt Payoff Planner](/calculators/debt-payoff-planner). Here's what it showed:

Snowball Strategy (Smallest Balance First)

James tackles the £480 store card first, then the £3,500 credit card, then the car loan:

Avalanche Strategy (Highest APR First)

James tackles the 22.99% store card first, then the 19.99% credit card, then the car loan:

What If James Targets the Car Loan First? (Biggest Balance)

If James puts his extra money toward the car loan (biggest balance, lowest rate):

That £300 difference isn't nothing. It's several months' worth of extra payments. Money James could use for an emergency fund or a holiday once he's debt-free.

Why High-Interest Debt Hurts More

Let's break down what's actually happening each month:

Store Card: £9/month in interest on £480 balance = 1.9% monthly

Credit Card: £58/month in interest on £3,500 balance = 1.7% monthly

Car Loan: £65/month in interest on £12,000 balance = 0.5% monthly

The car loan charges the most interest in absolute pounds (£65), but as a percentage of the balance, it's the cheapest debt. The credit cards are eating him alive.

By targeting high-interest debt first, James pays off the "expensive" debts faster, which frees up those monthly payments to attack the car loan even harder later.

The Cascading Payment Effect

Here's what actually happens with Avalanche strategy:

Month 1-3: Attack store card

Month 4-18: Attack credit card

Month 19-45: Attack car loan

By paying off the high-interest debts first, James builds a payment snowball that crushes the car loan faster than if he'd started with it.

What James Actually Did

James chose Avalanche after running the numbers. His action plan:

With the extra £25 from his raise:

The Emotional Journey

Month 3: Store card = £0. "That first zero balance was huge," James said.

Month 18: Credit card = £0. "I'd been carrying that card for 5 years. Seeing it paid off felt like cutting off a weight."

Month 45: Car loan = £0. DEBT-FREE. "The car finally felt like *mine*. That £480/month could go to savings and fun money."

The Bottom Line

When you have debts with wildly different balances and interest rates:

Use our [Debt Payoff Planner](/calculators/debt-payoff-planner) to compare strategies with your actual numbers. See your timeline. Make your plan. Then start.

You've got this.